Delhi High Court
Mmtc Ltd. vs M/S Karam Chand Thapar & Bros. ... on 31 October, 2018
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 27.8.2018
Judgment pronounced on: 31.10.2018
+ O.M.P. (COMM) No.193 of 2017
MMTC LTD. ..... Petitioner
Through: Mr. Sanat Kumar, Sr. Adv. with
Mr. Vikram Vipin Mehta, Mr.
Saurobroto Dutta, Mr. Vinayak
Batta, Advs.
versus
M/S KARAM CHAND THAPAR & BROS.
(COAL SALES) LTD. ..... Respondent
Through: Mr. Rajeev K. Virmani, Sr.
Adv. with Mr. Jyoti Prakash
Sahu and Mr. Rishabh
Bhargava, Advs.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SHAKDHER
%
RAJIV SHAKDHER, J.
1. This petition is directed against an unanimous award dated
7.1.2017. By virtue of the impugned award, the Arbitral Tribunal has
allowed all three claims preferred by the respondent along with
interest.
2. The details as to the nature of the claims, the amounts awarded
against them and the interest directed to be paid against each of the
claims along with the period for which interest is payable is set forth
hereafter:
Claim Nature of the Claim Amount Interest awarded
Awarded along with
period
1. Services/handling Rs.1,27,62,425/- Rs.95,30,830.50
bills (9.9.2010 till
7.1.2017 @ 12%
on
Rs.1,27,62,425/-
p.a.)
2. Despatch earned USD 2,42,445.03 USD
1,81,106.43
(9.9.2010 till
7.1.2017 @ 12%
on USD
2,42,445.03)
3. Bank Charges Rs.19,69,264.44/- Rs.13,04,692.27
(extension of BG) (includes (9.9.2010 till
principal sum of 7.1.17 @ 12%
Rs.17,46,576.27 calculated on
+ interest* Rs.17,46,576.27-
Rs.2,22,688.44/-
* @ 10% p.a.
from 2.6.2009 till
9.9.2010
2.1 Besides the aforesaid, the respondent had lodged a fourth Claim
qua pendente lite and future interest. The pendente lite interest
awarded by the Arbitral Tribunal is shown in the table in paragraph 2
above. Insofar as the future interest is concerned, the Arbitral
Tribunal awarded the same also at the rate of 12% per annum both on
the total amount awarded in INR and the amount awarded in USD i.e.
Rs.2,53,44,523.77 and USD 4,23,551.46 respectively.
3. In order to adjudicate the disputes, which have arisen between
the parties herein, the following broad facts are required to be noticed.
4. The petitioner, it appears, entered into a contract dated
11.4.2005 (in short "April 2005 Contract") with the National Thermal
Power Corporation Limited (in short "NTPC") for importing non-
coking steam coal (hereinafter referred to as "coal").
4.1 For the purposes of importing coal to Indian ports and for
arranging vessels and having them cleared so that it could be delivered
to NTPC Thermal Power Stations, the petitioner engaged the services
of the respondent. The respondent, who, is in the business of
stevedoring, handling, storage, etc., entered into an agreement with the
petitioner on 1.6.2005 (in short "June 2005 Agreement").
4.2 The scope of the respondent's work under the June 2005
Agreement involved stevedoring, handling and forwarding of coal,
unloading vessels, handling and storage of coal at the port of
discharge, arrangement of railway wagons, wagon loading and
transportation of coal to NTPC Thermal Power Stations.
5. Coal in this case was supplied by a foreign supplier, that is, an
entity by the name, Adani Global Pte. Ltd. The respondent, thus, over
a period spanning between June, 2005 to May, 2006 handled 31
vessels for the petitioner.
6. In terms of the June 2005 Agreement, the respondent was
entitled to earn despatch for a timely unloading of the vessels, while in
the event of delay, it was required to pay demurrage. Concededly, out
of 31 vessels, the respondent earned despatch qua 25 vessels. Insofar
as the remaining 6 vessels are concerned, the respondent and the
petitioner conceded before the Arbitral Tribunal that the respondent
had incurred demurrage vis-a-vis two vessels, which, narrowed down
the dispute to four vessels.
7. The respondent, thus, claimed that it was entitled to despatch in
respect of three out of four vessels and insofar as the fourth vessel was
concerned, there was Customary Quick Despatch (CQD) and
therefore, no amounts were payable either by way of demurrage or to
be earned by way of despatch.
7.1 The four vessels in issue over which dispute between the parties
is centered, bear the following names: (i) MV Jia Xin Shan; (ii) MV
Pacific Pioneer; (iii) MV Dubai Guardian; and (iv) MV Vancouver
Victory.
7.2 Likewise, the amounts quantified towards despatch and
demurrage by the respondent and the petitioner respectively vis-a-vis
each of the aforementioned four vessels is detailed out hereafter:
Sl.No Vessel Respondent's Petitioner's
Quantification Quantification
(USD) (USD)
1 MV Jia Xin Shan 16567.35 76873.16
Despatch Demurrage
2 MV Pacific 13656.125 152288.54
Pioneer Despatch Demurrage
3 MV Dubai 3277.20 56036.50
Guardian Despatch Demurrage
4 MV Vancouver CQD Basis 163420.40
Victory Demurrage
8. The record shows that, on 22.2.2006, the petitioner's Regional
Office had forwarded lay time calculation sheets to the foreign
supplier with regard to three vessels i.e., MV Jia Xin Shan, MV
Pacific Pioneer, MV Dubai Guardian, (hereafter referred to as "subject
vessels") in respect of which the respondent was claiming despatch.
8.1 It is, however, the petitioner's case that its Regional Office had
committed an error in showing despatch against the aforementioned
subject vessels, as it failed to take into account the pre-berthing delay,
which as per Clause 2.2.8 of the June 2005 Agreement obtaining
between the parties was to be on account of the respondent. In other
words, had the pre-berthing delay been taken into account, the lay-
time calculation sheets would have shown that demurrage had been
incurred against the subject vessels and not despatch. It is the
petitioner's stand that this error was found out by its Shipping
Department, once, the foreign supplier had refused to accept the lay
time calculation sheets, which showed that despatch had been earned
qua the subject vessels.
9. The record also shows that it is the petitioner's case that it held a
meeting with the foreign supplier on 22.11.2006 and 23.11.2006 to
resolve the issue of despatch and demurrage, amongst others, with
regard to the NTPC Shipments including the subject vessels. The
petitioner claims that at the meeting, it was agreed that the
aforementioned four vessels had incurred demurrage. Furthermore, it
is the petitioner's stance that insofar as the two out of four vessels are
concerned, that is MV Jia Xin Shan and MV Pacific Pioneer, even
demurrage had been quantified. Insofar as the other two vessels are
concerned, namely, MV Dubai Guardian and MV Vancouver Victory,
though it was agreed that demurrage would be levied, the amount to
be paid had not been quantified.
9.1 It is also the case of the petitioner that at the said meeting, a
decision was taken that insofar as MV Dubai Guardian was
concerned, the petitioner would revert qua the same on 27.11.2006.
The petitioner claims that via communication dated 28.11.2006, its
Regional Office erroneously reiterated its earlier stand vis-a-vis the
aforementioned four vessels, though, all that was required to be done,
as agreed at the meeting dated 22.11.2006 and 23.11.2006, was to
revert with its comment vis-a-vis MV Dubai Guardian.
10. It is in this background that the respondent vide notice dated
15.5.2010, triggered the arbitration mechanism. Via this notice, the
respondent claimed a sum of Rs.3,53,45,960/- along with interest.
Notice called upon the Indian Council of Arbitration (in short 'ICA') to
appoint an Arbitrator in terms of Clause 2.15 of the June 2005
Agreement.
11. On 09.09.2010, the respondent filed its Statement of Claims
(SOC). Since the petitioner's nominee Arbitrator declined to accept
the appointment, ICA vide its communication dated 06.01.2012,
informed the parties that it had constituted a fresh Arbitral Tribunal
after appointing a substitute Arbitrator in place of the petitioner's
nominee.
12. The petitioner was not happy about the appointment of a
substitute Arbitrator by the ICA. This objection was raised by the
petitioner in its letter dated 16.01.2012. Via the said letter, the
petitioner sought an opportunity to nominate its own appointee and in
line with its stand sought dissolution of the Arbitral Tribunal. The ICA
having received the letter dated 16.01.2012, informed the respondent
via letter dated 01.02.2012 that hearing in the matter had been
cancelled and that it was being kept in abeyance till further orders.
13. Given these circumstances, the respondent moved this Court in
February, 2012 via a petition under Section 11 (6) of the Arbitration
and Conciliation Act, 1996 (in short '1996 Act'). The petition filed by
the respondent was numbered as: Arb. P. No.116/2012.
14. This Court, vide order dated 30.04.2012, disposed of the
petition after counsel for the ICA informed the Court that it had
appointed a former Judge of this Court as an Arbitrator. The Court
was further informed, something which is recorded in the very same
order, that the two Arbitrators would decide as to who would be the
Presiding Arbitrator. At this hearing, parties agreed that the arbitration
proceedings would be conducted as per the rules of ICA.
15. Consequently, on 29.05.2012, the re-constituted Arbitral
Tribunal held its preliminary meeting. In and about July, 2012, the
respondent filed a fresh SOC. This SOC was at variance with the
SOC filed by the respondent on 09.09.2010. The variation in the SOC
was with regard to claims No. 2, 4 & 7. The details of variation are set
forth below:
Claim No. Particulars Amount in SOC Amount
dated 09.09.2010 claimed under
SOC of July,
Claim No.2 Despatch earned Rs.1,16,83,876/- USD
2,42,445.03
Claim No.4 Interest claimed Rs.68,08,946/- Rs.1,06,84,702/-
for delayed (from 08.07.2006 (from
release of to 30.04.2010) 08.07.2006 to
amount 30.06.2012)
Claim No.7 Litigation Rs.2 lacs Rs.25 lacs.
Expenses
16. In and about September, 2012, the petitioner filed its Statement
of Defence (in short 'SOD'). Pertinently, in the SOD no objection was
taken that the respondent had earlier filed a SOC on 09.09.2010 which
was substituted by another SOC in July, 2012 and that in the second
SOC, the amounts claimed in respect of claim No. 2, 4 & 7 had been
enhanced. The Arbitral Tribunal, thereafter, based on the pleadings
and documents framed a singular issue which was "Whether the
claimant (i.e., the respondent herein) is entitled to claims as
enumerated in the Statement of Claim?"
17. Unfortunately, during the course of the proceedings, the
Presiding Arbitrator resigned, which prompted the ICA to write to the
other Arbitrators, on 09.04.2013, with a request to appoint another
Presiding Arbitrator. This request was reiterated by the ICA vide its
communication dated 30.04.2013, which resulted, once again, in the
re-constitution of the Arbitral Tribunal.
18. The record shows that the respondent had produced two
witnesses i.e. Mr. R. Chopra (CW-2) and Mr. P.K. Banerjee (CW-1),
while the petitioner had produced one witness i.e. Mr. B.P. Mahapatra
(RW-1). The record also shows that the respondent had served upon
the petitioner at least three notices for production of documents.
These notices are dated: 15.07.2013, 20.08.2013 and 07.09.2013.
19. Since the respondent did not obtain the desired response, an
application was moved before the Arbitral Tribunal under Section 27
of the 1996 Act on 09.09.2013.
19.1 The Arbitral Tribunal disposed of the aforementioned
application vide order dated 14.02.2014. Via this order, the Arbitral
Tribunal directed the petitioner to produce original/office copies of the
documents referred to in the application and those adverted to in the
notices dated 15.07.2013 and 07.09.2013. Furthermore, the petitioner
was also directed to file affidavits of its three officials referred to in
paragraph 8 of the application and that the affidavits so filed would
advert to the documents referred to in notice dated 15.07.2013 and
letter dated 04.03.2010. The order, however, gave opportunity to the
petitioner to rebut evidence.
20. On 30.05.2014, Mr. B.P. Mahapatra (RW-1), inter alia, stated
that the communications dated 22.02.2006 were neither in existence
nor did they seem to have been made or were available in its
Bhuvneshwar office. Insofar as the communication with the foreign
supplier was concerned, it was, curiously, stated that the same could
not be produced on account of commercial secrecy and, in any event,
upon a search being carried out, it did not contain any communication
with the foreign supplier. A perusal of the record discloses that during
cross-examination of the petitioner's witness i.e. RW-1, on
28.07.2014, the Arbitral Tribunal directed the petitioner to file a
statement showing the despatch earned by the respondent qua 25
vessels with full details and supporting documents, together with the
amount, if any, paid to the respondent. This direction was required to
be complied by the petitioner on or before 31.08.2014.
20.1 Evidently, on 16.09.2014, the Arbitral Tribunal took on record a
statement of despatch earned by vessels as also the Minutes of
Meeting dated 22.11.2006 and 23.11.2006. These were meetings,
which were held between the representatives of the petitioner and the
foreign supplier for settlement of account. On 20.02.2015, upon
closure of cross-examination of the petitioner's witness i.e. RW-1, a
direction was issued to him to file an affidavit with regard to the
information sought from him during his cross-examination on
19.02.2015 and 20.02.2015. In and about April, 2015, the petitioner
filed documents which were sought from its witness.
20.2 By an order dated 27.04.2015, the Arbitral Tribunal directed the
petitioner to place on record a tabulated statement as regards the
correct basis for arriving at demurrage in respect of the
aforementioned four vessels. Compliance qua this order was made by
the petitioner on 29.07.2015. Arguments were concluded before the
Arbitral Tribunal on 18.05.2016, when, written submissions filed by
the parties were received. The Arbitral Tribunal, on the said date,
reserved the matter for pronouncement of the Award and directed
parties to file their bill of costs within a period of two weeks.
Pertinently, the respondent does not appear to have filed its bill of
costs.
20.3 Consequently, on 07.01.2017, the Arbitral Tribunal pronounced
its Award. Upon receipt of a copy of the impugned Award, the
petitioner instituted the captioned petition.
20.4 In the meanwhile, the respondent served a legal notice dated
15.02.2017 on the petitioner demanding payments under the Award,
which was replied to by the petitioner on 10.04.2017.
Submissions of counsel
21. Given this background, arguments on behalf of the petitioner
were advanced by Mr. Sanat Kumar, Senior Advocate, instructed by
Mr. Vikram Vipin while those on behalf of the respondent were
advanced by Mr. Rajiv Virmani, Senior Advocate, instructed by Mr.
Saurobroto.
21.1 The submissions of Mr. Sanat Kumar can, broadly, be
paraphrased as follows:
(i) Firstly, the Arbitral Tribunal committed a grave error in relying
upon the Statement of Facts (in short 'SOFs') and lay time calculation
sheets dated 22.02.2006 without realizing that in terms of Clause
2.2.11 of the June 2005 Agreement, no finality can be attached to the
same till such time the foreign supplier accepts the said document.
The SOFs, ordinarily, would bear the signatures of the Master of the
Vessel, the representative of the Seller (i.e. the foreign supplier) and
the Receiver/Buyer. The respondent, who is the stevedoring and
handling contractor is not involved in the exercise of preparing SOFs.
In view of the fact that the foreign supplier had not accepted the SOFs,
the petitioner's Shipping Department located in its corporate office
went over the calculation sheets and discovered that demurrage had
been incurred vis-à-vis the aforementioned four vessels. The Arbitral
Tribunal wrongly ignored the conclusion reached in this behalf by the
petitioner's Shipping Department.
(ii) Secondly, the Arbitral Tribunal, while accepting the Minutes of
the Meeting dated 22.11.2006 and 23.11.2006 vis-à-vis 27 vessels,
proceeded to reject the same vis-à-vis the aforementioned four vessels.
At the said meeting, it was agreed that four vessels had incurred
demurrage, which, as a matter of fact vis-à-vis two vessels had
actually been quantified. These are facts, which the Arbitral Tribunal
ought not to have taken note of, and if, the demurrage quantified is
taken into account, the petitioner ought to have been given a credit of
USD 17000.
(iii) Thirdly, the Arbitral Tribunal wrongly placed reliance on the
communication dated 28.11.2006. The reason for the same is that at
the meeting held on 22.11.2006 and 23.11.2006, the petitioner was
required to revert with information only with respect to one vessel i.e.
M.V. Dubai Guardian, and not qua all four vessels. Furthermore, there
was nothing on record to show that the foreign supplier had, in fact,
accepted the suggestions made by the petitioner in its communication
dated 28.11.2006.
(iv) Fourthly, the Arbitral Tribunal wrongly concluded that the
account of the foreign supplier had been settled. There was nothing on
record, which could have led the Arbitral Tribunal to reach such a
conclusion. The onus, in this behalf, lay on the respondent.
(v) The Arbitral Tribunal failed to factor in the pre-berthing delay,
the burden qua which, as per Clause 2.2.8 of the June 2005
Agreement, lay on the respondent. The Arbitral Tribunal was required
to also appreciate the fact that in terms of Clause 2.2.9, lay time
commenced only 12 hours after Notice of Readiness (in short 'NOR')
was tendered. Accordingly, if these factors were borne in mind, as
were taken into account by the petitioner's Shipping Department, it
would have discovered that in respect of each of the aforementioned
four vessels, time had been lost and demurrage had been incurred.
Pertinently, the petitioner's Regional Office had also made the same
mistake, which came to fore, once, the foreign supplier refused to
accept the calculations made by the Regional Office. It is to be borne
in mind that as per the June 2005 Agreement whether despatch had
been earned or demurrage had been incurred was an aspect which had
to be settled between the petitioner and the foreign supplier. The
consequences of the settlement were required to be borne by the
respondent. Therefore, the contention advanced on behalf of the
respondent that the petitioner had changed its stand had no basis. The
Arbitral Tribunal wrongly applied the test, which is, that since in other
cases, the petitioner's stand had been accepted and, therefore, the same
circumstance ought to prevail in respect of four vessels in issue was
misconceived as that could not be taken as a yardstick for concluding
as to which of the two calculations were correct.
(vi) The Arbitral Tribunal erred in awarding claim No. 2 in USD.
The Arbitral Tribunal ought to have taken note of the fact that in the
first SOC filed before the ICA the respondent claimed money in INR
and it was only when the second SOC was filed that the claim was
made in USD. As a matter of fact, in the demand letter claiming
despatch dated 11.11.2009 and the notice invoking arbitration dated
15.05.2010, the respondent had claimed despatch in INR and not in
USD. The Arbitral Tribunal failed to notice the aforesaid facts.
(vii) The Arbitral Tribunal erroneously allowed interest qua claim
No. 2 from 09.09.2010 when the first SOC was filed whereas the
claim under this head in USD was made for the first time in July,
2012.
(viii) The Arbitral Tribunal failed to notice the fact that in terms of
Clause 2.6.1, Clause 2.10.1 and Clause 2.12, payments had to be made
in INR and not in USD. Besides this, it was required to be appreciated
that the contract was entered into between the parties in India, the
subject works were executed in India and payments had to be made to
the respondent which is a company incorporated in accordance with
the laws of India.
(ix) The Arbitral Tribunal failed to appreciate the fact that at the
meeting held on 22.11.2006 and 23.11.2006 between the petitioner
and the foreign supplier, it was settled that insofar as the
aforementioned four vessels were concerned, they had incurred
demurrage. Furthermore, at the very same meeting, insofar as the two
out of the four vessels were concerned, i.e. MV Jia Xin Shan and MV
Pacific Pioneer, the quantum of demurrage was also finalized.
Furthermore, insofar as MV Dubai Guardian was concerned, the
petitioner was to revert with response as to whether or not there was
shipping activity on 21st September of the concerned year. Thus, vis-
à-vis MV Dubai Guardian and MV Vancouver Victory, it was agreed
at the meeting that both had incurred demurrage though, the amount
had not been quantified. The perversity in the impugned Award was
apparent inasmuch as while it accepted the result with regard to 27
vessels insofar as the remaining four vessels were concerned, it did not
accept the results.
(x) The Arbitral Tribunal also failed to take in account the fact that
though, the petitioner was called upon to comment only with respect
to MV Dubai Guardian, its Regional Office vide communication dated
28.11.2006 ended up taking a stand vis-à-vis five vessels which
included the aforementioned four vessels. As the petitioner's Regional
Office had committed an error inasmuch as it had not taken into
account the pre-berthing delay the communication dated 28.11.2006
had not been accepted by the foreign supplier.
(xi) The Arbitral Tribunal committed a patent error in holding that
the petitioner had not led evidence to show that the respondent had
incurred demurrage vis-à-vis the aforementioned four vessels. The
documents that were in the petitioner's possession, which included
Minutes of Meeting dated 22.11.2006 and 23.11.2006 were placed on
record. These minutes show that despatch had been earned only vis-à-
vis 25 vessels. In this behalf, reliance was placed on the testimony of
the petitioner's witness (RW-1) which shows that in the cross-
examination, he had indicated that there was no account struck vis-à-
vis despatch/demurrage with the foreign supplier. In other words, in
respect of the same, a dispute obtained between the petitioner and the
foreign supplier. The Arbitral Tribunal, while awarding claim No. 2
in favour of the respondent, failed to notice that the claimant's witness
(CW- 1) whose cross-examination was conducted on 29.06.2013 had
stated as follows: "It is correct that the delay was there between four
to eight/nine days in clearing/discharging the ships." There, thus,
admittedly, was a delay in discharging the ships.
(xii) The Arbitral Tribunal erroneously has awarded full costs to the
respondent without taking the trouble of quantifying the same. Insofar
as the costs are concerned, it is well settled that an Arbitral Tribunal
can award reasonable costs. In this behalf, what is required to be
noticed is that in its first SOC, the respondent claimed a sum of Rs.2
lacs towards litigation costs while in the second SOC its claim under
the said head had been enhanced to Rs.25 lacs. In the notice dated
15.02.2017 served by the respondent on the petitioner, albiet, after the
award had been rendered, a sum of Rs.1,10,89,470/- was claimed.
Furthermore, though the respondent was directed by the Arbitral
Tribunal, vide its order dated 18.05.2016, to file a bill of costs within a
period of two weeks it had failed to do the needful. Therefore, for all
these reasons, claim No. 7, which related to costs, ought to be set
aside.
(xiii) The Arbitral Tribunal failed to appreciate that no amount
towards extension of bank guarantee charges ought to have been
awarded as there is no pleading in the SOC in that behalf and
secondly, no material had been placed on record to show as to what
were the charges incurred in that regard and that, the extension of
bank guarantee was with mutual consent of the parties.
(xiv) The Arbitral Tribunal committed patent error in passing an
order under Section 27 of the 1996 Act on an application for
production of documents. This order could only be passed by a Court
having jurisdiction in the matter.
(xv) The Arbitral Tribunal erroneously granted pendente lite and
future interest at the rate of 12% per annum without adverting to any
document or any business factors.
21.2 In support of his submission, Mr. Sanat Kumar has relied upon
the following judgments: Oil & Natural Gas Corporation Ltd. Vs.
Saw Pipes Ltd.. (2003) 5 SCC 705; Associate Builders V. Delhi
Development Authority, (2015) 3 SCC 49; Rajasthan State Industrial
Development Vs. Diamond & Gem Corporation Limited & Anr,
(2013) 5 SCC 470; K.P. Poulose Vs. State of Kerala & Another,
(1975) 2 SCC 236; Sanjeev Kumar Jain Vs. Raghubir Saran
Charitable Trust & Anr (2012) 1 SCC 455 and MMTC Vs. Al Bamar
Company Ltd, 159 (2009) Delhi Law Times 513 (DB).
22. As against this, Mr. Virmani relied upon the petitioner's
communication dated 28.11.2006 to demonstrate that, in respect of the
four vessels in issue the petitioner had accepted that the respondent
had earned despatch with regard to three vessels and that, in respect of
the fourth vessel, no despatch/demurrage had been incurred i.e. it was
on CQD basis.
(i) The petitioner, despite being served with the notices for
production of documents and the order of the Arbitral Tribunal dated
14.02.2014, refused to produce the relevant documents and
communications it had with the foreign supplier. The petitioner while
taking the stand that it would not place the relevant information on
record on account of commercial secrecy also incongruously indicated
that the information was not available with it.
(ii) The objection taken by the petitioner that the respondent had
filed a second SOC was sought to be repelled by bringing to my notice
that in the SOD filed vis-à-vis the second SOC, the petitioner had
taken no such objection. The circumstances in which the second SOC
had been filed, were sought to be brought to my notice by referring to
paragraphs 17 & 18 of the second SOC. It was stated that the first
SOC had been filed with the ICA and upon the Arbitral Tribunal being
re-constituted, it filed the second SOC. Accordingly, it was contended
that there was no merit in the submission, which was raised for the
first time before this Court.
(iii) As regards the contention that in the second SOC claim No. 2
had been quantified in USD, it was submitted, once again, that the
petitioner in its SOD, had taken no such objection. It was indicated
that the claim was contested on merits and not on the ground that in
the first SOC, the claim was made in INR and, thereafter, in the
second SOC, the claim was made in USD. In order to support its
contention that there was nothing wrong in quantifying claim No. 2 in
USD, reliance was placed on the petitioner's letters dated 22.02.2006
and 28.11.2006 to the foreign supplier. It was pointed out that in both
the communications despatch and demurrage were quantified in USD.
Furthermore, it was submitted that the petitioner's statement dated
24.10.2014, filed pursuant to the Arbitral Tribunal's order, clearly,
established that the despatch was earned in USD.
(iii)(a) Furthermore, it was submitted that the reliance placed on
Clause 2.6.1 and Clause 2.12.1 of the June 2005 Agreement was
misconceived as they relate to service charges that the petitioner had
to pay and the bank guarantee which the respondent was required to
furnish. In other words, these clauses could not be used by the
petitioner to establish that the claim for despatch could only be made
in INR and not in USD. Besides this, it was submitted that there was
no bar in making a claim in USD and all that the petitioner was
required to do was to convert USD into INR. Reliance in this behalf
was placed on paragraph 13 of the judgment of this Court in Centravis
Production Ukraine vs. Gallium Industries Limited, (2014) SCC
OnLine Del 6787.
(iii)(b) It was lastly contended that no such objection was taken
on behalf of the petitioner before the Arbitral Tribunal.
(iv) As regards the submission made on behalf of the petitioner that
the award under claim No. 2 had been made by the Arbitral Tribunal
without appreciating the import of Clause 2.2.4, Clause 2.2.8, Clause
2.2.9(i) and Clause 2.2.11. The same were refuted by adverting to the
petitioner's stand taken in the SOFs, the letters dated 22.02.2006 and
28.11.2006 addressed to the foreign supplier.
(iv)(a) It was contended that despite taking recourse to the RTI route
and notices for production, the respondent was stonewalled. It was
sought to be emphasized that it was finally the respondent's witness
i.e. Mr. R. Chopra (CW-2), who with his affidavit of evidence had
placed on record the letters dated 22.02.2006 and 28.11.2006. Since
the petitioner's witness i.e. RW-1, had taken a stand in his affidavit
that the letters dated 22.02.2006 and 28.11.2006 had not been
exchanged with the foreign supplier, the respondent got issued notices
for production of documents and also filed an application under
Section 27 of the 1996 Act, on which, the Arbitral Tribunal passed
orders dated 14.02.2014 and 30.05.2014.
(iv)(b) It was emphasized that pursuant to the aforesaid orders,
an affidavit dated 30.05.2014 was filed on behalf of the petitioner
wherein the existence of communication dated 22.02.2006 was denied
and, at the same time, a stand was taken that the same communication
to the foreign supplier could not be produced on account of
commercial secrecy. It was also emphasized that the petitioner, for
the first time, showed in the statement filed, which is dated
12.09.2014, that despatch had been earned and furthermore, along
with this statement produced the Minutes of Meeting dated 22.11.2006
and 23.11.2006. The fact that the petitioner's witness i.e. Mr. B.P.
Mahapatra (RW-1), had accepted the factum of existence of letters
dated 22.02.2006 and 28.11.2006 was sought to be demonstrated by
relying upon the following part of his cross-examination held on
09.12.2014:
"Q.24- (Witness shown three communications all dated
22.02.2006 at page Nos. 151, 152 & 153 of the documents
filed by the Claimant on 03.07.2012). I put it to you that you
personally had addressed these three communications to
Adani Global Pte. Ltd., Singapore.
Ans.- Please show me the original. Signatures can be
identified by me only on going through the originals.
Per Tribunal:
Can you identify your signatures at pages 151 and 153 or
not?
Ans. These might be my signatures.
Q.25- (Witness is shown a communication dated 28.11.2006
at page 149 and 150 from the documents filed on 03.07.2012
by the claimant). I put it to you that this communication was
signed by Mr. P.K. Chaki of MMTC and sent to Mr. Tito Job
of Adani Exports Ltd.?
Ans. Yes."
(v) Furthermore, the fact that demurrage had been incurred had not
been shown to have been confirmed by the foreign supplier and that,
no litigation had been initiated either by the petitioner or by the
foreign supplier, this was sought to be established by referring to the
following part of the cross-examination of the petitioner's witness
(RW-1) held on 19.02.2015:
"Q 35- Since you had never seen a Charter-Party Agreement
for any of the 31 vessels in questions, you could not have
confirmed the alleged demurrage as set out in the above
mentioned Chart?
Ans.- The demurrage part is no confirmed with the foreign
supplier and still it is in dispute.
Q. 36.- I refer you to your statement dated 24.10.2014, filed
before the AT pursuant to order dated 16.9.2014, where you
have stated "statement showing documents like NOR, SOF
and detail calculations for dispatch or demurrage as
confirmed in the minutes of meeting 22.11.2005 and
23.11.2005"is false to your knowledge, isn't it?
Ans.- No
Q. 37- I take it that MMTC has not paid any money to Adani
for purchase and shipment of coal covered by 31 vessels in
question. Isn't it?"
Ans.- MMTC paid the money to Adani for the cost of the coal
covered by 31 vessels.
Q.38-Has Adani initiated any legal proceeding against
MMTC for recovery of any money arising out of transactions
relating to 31 vessels in question?
Ans.- I do not know.
XXXXXXXXXXX
Q.40 Has MMTC initiated any legal proceeding against
Adani for recovery of any money in respect of transactions
covered by 31 vessels in question?
Ans.-I do not know. I can check with the corporate office and
inform."
(vi) It was submitted that the argument advanced on behalf of the
petitioner that the Arbitral Tribunal had not taken into account the
Minutes of the Meeting dated 22.11.2006 and 23.11.2006 and, instead,
relied upon the irrelevant evidence such as SOFs of other vessels and
letters and fax dated 22.02.2006 and 28.11.2006 was untenable for the
following reasons:
(a) That the petitioner itself had not relied upon the Minutes of
Meeting dated 22.11.2006 and 23.11.2006.
(b) That the letters dated 22.02.2006, which were addressed by the
petitioner to the foreign supplier would show that the four vessels in
issue had earned despatch and there was no pre-berthing delay on
account of the respondent.
(c) On 28.11.2006, the petitioner had written to the foreign supplier
that the respondent had earned despatch qua three vessels and CQD in
respect of the fourth vessel. This communication also did not attribute
pre-berthing delays to the respondent. As a matter of fact, this
communication showed that the petitioner was not wanting to act in
terms of the Minutes of Meeting dated 22.11.2006 and 23.11.2006.
(d) Though the petitioner denied the existence of the letter dated
28.11.2006, its own witness admitted to its existence during cross-
examination.
(e) The petitioner had failed to produce any document post
28.11.2006 to demonstrate that the foreign supplier had disputed the
stand taken by it in its letter dated 28.11.2006. The petitioner's
witness, Mr. B.P. Mahapatra (RW-1), who had dispatched the letters
dated 22.02.2006 and signed the Minutes of Meeting dated 22.11.2006
and 23.11.2006 had admitted that his superior, one, Mr. P.K. Chaki
had signed the fax dated 28.11.2006.
(f) The petitioner neither filed a counter claim nor demanded
payment of demurrage from the respondent despite subsistence of
Clause 2.2.11 in the June 2005 Agreement. The Arbitral Tribunal had
decided the claim based on the best available evidence on record and
was entitled to draw adverse inference on account of repeated refusal
by the petitioner to produce its communications and accounts struck
with the foreign supplier.
(g) The petitioner was not entitled to seek re-appreciation of
evidence.
(vii) Furthermore, insofar as claim No. 1 was concerned, reliance
was placed on the testimony of the petitioner's witness (RW-1) to
show that a sum of Rs.1,28,23,183/- was lying as credit balance in
respondent's books of account. Furthermore, in this behalf, reliance
was also placed on the petitioner's affidavit dated 15.04.2015.
(viii) As regards claim No. 3, learned counsel submitted that the bank
guarantee had been renewed eleven (11) times despite the contract
having been performed. In this behalf, reliance was also placed on
Ex.CW-2/R-1 to Ex.CW-2/R-12. Furthermore, my attention was
drawn to the averments made in paragraph 12 of the SOC which
showed that the respondent had quantified the bank charges and
commission at Rs.17,46,576/-. It was contended that in the affidavit of
evidence dated 14.11.2012, these charges were adverted to by the
respondent's witness i.e. Mr. P.K. Banerjee (CW-1). My attention was
also drawn to the fact that no cross-examination of the respondent's
witness with regard to quantum of bank charges was carried out.
(ix) Insofar as the submission made on behalf of the petitioner that
interest ought to have been awarded on the basis of libor in respect of
the claims awarded in USD was concerned, learned counsel submitted
that no such ground is raised in the petition. Furthermore, as noticed
above, it was argued that despatch was earned in USD and, therefore,
at the time of payments/execution, the petitioner would be required to
convert the same in INR and, accordingly, remit the money. It was
stated that neither party had taken the stand that the petitioner was
required to remit the despatch earned by the respondent to its overseas
account. The rate of interest, according to the learned counsel, was
reasonable and that, the Arbitral Tribunal, in that behalf, only
exercised its power as vested upon it under Section 31(7)(a) & (b) of
the 1996 Act.
(x) As regards the objection taken to the award of costs by the
Arbitral Tribunal, it was contended that the aspect with regard to
quantum of costs will be examined at the time of execution of the
Award. This objection, according to the learned counsel, could not
form part of a petition under Section 34.
(x)(a) Furthermore, it was submitted without prejudice to its aforesaid
stand vis-a-vis costs that since in its second SOC, the respondent had
claimed costs of Rs.25 lacs, the said sum could be treated as full costs
awarded by the Arbitral Tribunal.
Reasons & Analysis
23. I have heard the learned counsel for the parties and perused the
record.
24. To my mind, the respondent had, basically, lodged three claims
and also sought interest qua each of the claims. Claim No. 1 pertained
to the payments of money towards service rendered by the respondent,
while Claim No. 2 referred to amounts which, according to the
respondent, were due to it on account of the despatch earned with
respect to the subject vessels i.e. three vessels referred to above.
Insofar as Claim No. 3 was concerned, it required the petitioner to
reimburse the respondent qua the bank charges and commission paid
by it to the bank for extension of the bank guarantees. The Arbitral
Tribunal has awarded moneys to the respondent under each of the
claims along with interest for the period referred to in the impugned
Award, albeit, at the rate of 12% per annum.
25. Therefore, I would be discussing the arguments and counter
arguments made on behalf of the parties herein claim-wise and also
my view with regard to the conclusions arrived at by the Arbitral
Tribunal.
Claim No.1
26. Insofar as this claim is concerned, which relates, as indicated
above, to reimbursement for services rendered, there is, in fact, no
objection taken in the petition on behalf of the petitioner qua the same.
The Arbitral Tribunal has noticed in the impugned Award that moneys
towards service charges are payable to the respondent in terms of
Clause 2.6 of the contract. These service charges were required to be
paid on the basis of the quantity received by the Thermal Power
Stations of NTPC with a right to the petitioner to adjust the same in
respect of both quality and quantity. The fact that this amount is
payable, as rightly argued on behalf of the respondent, is discernable
from the following extract from the testimony of Shri B.P.Mahapatra
(RW-1):
"Q.66- Books of Account of MMTC continue to show a sum of
Rs.1,29,84,100/- as the amount due and payable to the claimant
even after this communication, isn't it?
Ans.-As per the record of F&A, an amount of Rs.1,28,23,183.00
is lying as credit balance in the Vendor Ledger of M/s KCT.
XXXXXXXXXXXXX
Q. 82 - MMTC had approved/passed all the bills of the claimant
for Rs.50,05,22,856/- isn't it?
Ans.-NTPC Limited had settled the MMTC's claim for
Rs.49,48,45,659.00 for 31 vessels, out of which MMTC,
Bhubaneswar had paid Rs.48,18,61,559/- to M/c KCT.."
27. Clearly, the aforesaid would show that the petitioner's witness
(RW-1) had claimed that a sum of Rs.1,28,23,183/- was lying to the
respondent's credit [i.e. Karam Chand Thapar (KCT)]. The
respondent, however, appears to have restricted its claim on account of
service charges to a sum of Rs.1,27,62,425/- in addition to the interest
payable on the same. Therefore, I have no difficulty in concluding
that the said amount has been rightly awarded by the Arbitral Tribunal
in favour of the respondent.
Claim No.2
28. The foregoing discussion would show that out of 31 vessels,
handled by the respondents at the Paradip Port during the period
spanning between May-June, 2005 and January, 2006, the dispute
centres around only the subject vessels. The subject vessels being:
MV Dubai Guardian, MV Jia Xin Shan and MV Pacific Pioneer. The
respondent's stand is that he had earned despatch qua the subject
vessels whereas, according to the petitioner, the subject vessels have
incurred demurrage. Insofar as the fourth vessel is concerned, the
respondent's stand is that it attracts CQD and, therefore, has neither
earned despatch nor has it incurred demurrage.
29. The Arbitral Tribunal has taken this aspect into account while
holding that the net despatch earned by the respondent works out to
USD 2,42,445.03. The objection to this finding of the Arbitral
Tribunal raised by the petitioner is pivoted on the following:
(i) The contents of Minutes of Meeting held between the
representatives of the petitioner and the foreign supplier on
22.11.2006 and 23.11.2006 for settlement of despatch and demurrage
on account of shipments to NTPC, included the vessels handled by the
respondent.
(ii) The calculation made by the petitioner's Shipping Department,
which showed that its own Regional Office had made a mistake in
preparing the lay time sheets by not factoring in the pre-berthing
delay, which in accordance with Clause 2.2.8 of the June 2005
Agreement was to be borne by the respondent. According to the
petitioner, if the calculation of the Shipping Department was taken
into account, then, it would be clear that the subject vessels (i.e. three
vessels in issue), had incurred demurrage and not earned despatch. In
support of the calculations made by the Shipping Department, it was
sought to be argued that the Arbitral Tribunal had failed to take note
of Clauses 2.2.4, 2.2.8, 2.2.9(i) and 2.2.11 of the June 2005
Agreement. In particular, emphasis was laid on behalf of the petitioner
on the aspect that lay time commenced after expiry of 12 hours from
the date when the Notice of Readiness (NOR) was served.
(iii) Under Clause 2.2.11, finality can be attached to the lay time
calculation only when a foreign supplier accepts the same. Since, the
foreign supplier had not accepted the lay time calculations dated
22.02.2006, the matter was referred to the Shipping Department
located at the petitioner's corporate office, which noticed the error of
pre-berthing delay not being factored in the calculation made by the
Regional Office.
(iv) Though, the Arbitral Tribunal has accepted the Minutes of
Meeting dated 22.11.2006 and 23.11.2006, insofar as the 27 vessels
are concerned, it has rejected the same vis-à-vis four vessels which
include the subject vessels. The said Minutes of the Meeting would
show that four vessels had earned demurrage and in respect of two out
of four, demurrage had been quantified.
(v) The reliance by the Arbitral Tribunal on the communication
dated 28.11.2006 was flawed as the petitioner was required to revert
only vis-à-vis one vessel i.e. MV Dubai Guardian, whereas it ended up
taking a stand vis-à-vis five vessels which included the
aforementioned four vessels.
(vi) Lastly, there is nothing placed on record, which would
demonstrate, that the foreign supplier had settled its
despatch/demurrage accounts with the petitioner, and therefore, the
onus, if any, vis-a-vis this issue rested on the respondent.
30. The aforesaid objections taken on behalf of the petitioner, to my
mind, are untenable for the following reasons.
30.1 Mr. B.K. Mahapatra's (RW-1) communications dated
22.02.2006, sent to the foreign supplier clearly establishes that in
respect of each of the subject vessels, despatch had been earned by the
respondent. As per this communication, MV Jia Xin Shan had earned
despatch amounting to USD 16567.35; MV Dubai Guardian earned
despatch equivalent to USD 2891.78, while MV Pacific Pioneer had
earned a despatch equivalent to USD 13656.125.
30.2 A perusal of the communications dated 22.02.2006, would show
that it took into account the date when the vessel arrived at Paradip
Port, the total quantity imported; the rate of discharge of coal per day
in metric ton; the total time allowed; the date and time when the vessel
arrived and berthed; the date and time when NOR was tendered and
the date and time when NOR was accepted; the date and time when
discharge commenced and the date and time when it was completed.
30.3 Furthermore, the SOFs prepared in respect of each of the
subject vessels included the receiver's remarks (i.e. the petitioner's
remarks) vis-à-vis the aspect pertaining to delay on account of pre-
berthing.
30.4 The petitioner (i.e. the receiver) did not hold, for the reasons
given in the SOFs, the respondent responsible for the delay.
30.5 Besides this, the Arbitral Tribunal looked at not only the
Minutes of Meeting dated 22.11.2006 and 23.11.2006 but also at the
communication dated 28.11.2006.
30.6 Mr. B.P. Mahapatra, it appears, represented the petitioner at the
meeting held on 22.11.2006 and 23.11.2006. At that meeting, it
appears, a discussion was held with regard to settlement of accounts
between the representative of the petitioner and the foreign supplier
qua the NTPC shipments. The meeting, it appears, pertained to some
61 vessels, out of which 31 vessels were ones handled by the
respondent. It is pertinent to note that the communication dated
28.11.2006 was addressed by, one, Mr. P.K. Chaki, DGM (MIN.) at
the Regional Office of the petitioner.
30.7 The Arbitral Tribunal, faced with this material on record, was
required to come to a conclusion as to whether or not in respect of the
subject vessels i.e. the three vessels in issue, despatch had been earned
by the respondent. The communications dated 22.02.2006, clearly,
showed that the respondent had earned despatch. The SOFs also
established that the petitioner had taken a stand in its capacity as the
receiver that the pre-berthing delay, if any, was not attributable to the
respondent.
30.8 The only blip was the Minutes of Meeting dated 22.11.2006 and
23.11.2006. It is the petitioner's case that its Shipping Department
corrected the error, which was committed by its Regional Office,
once, a red flag had been raised by the foreign supplier.
30.9 Undoubtedly, the communication that emanated from the
petitioner's office on 28.11.2006, clearly, held that the respondent had
earned despatch. This was in consonance with the position taken by
the petitioner's Regional Office in its communications dated
22.02.2006. The only exception being that insofar as MV Dubai
Guardian was concerned, it held out that it had earned despatch
equivalent to USD 3277.20 as against USD 2891.78 shown in the
earlier communication dated 22.02.2006.
30.10 Since, the petitioner took the stand that the exercise undertaken
on 22.11.2006 and 23.11.2006 was a result of the foreign supplier
raising an objection, despite the respondent's effort before the Arbitral
Tribunal, nothing was placed on record to show that either a
settlement had been arrived at with the foreign supplier in line with the
decision taken in the Minutes of Meeting dated 22.11.2006 and
23.11.2006 or that the foreign supplier had raised any claim or
initiated any litigation against the petitioner.
30.11 As a matter of fact, as rightly pointed out on behalf of the
respondent, the petitioner, in these circumstances, would have in the
ordinary course, lodged a counter-claim before the Arbitral Tribunal.
No steps, in this behalf, were taken by the petitioner. The Arbitral
Tribunal, it appears, left with no choice proceeded to examine the
position, which obtained in the SOFs in respect of all 31 vessels. The
Arbitral Tribunal's analysis of the SOFs made it come to a conclusion
that the receiver's (i.e. the petitioner's) remarks prevailed. Therefore,
the Arbitral Tribunal came to a conclusion that the petitioner was not
justified in taking a different stand, particularly, in the background of
the fact that it had withheld relevant and vital information as regards
the settlement of accounts with the foreign supplier. The observations
of the Arbitral Tribunal made, in this behalf, for the sake of
convenience, are extracted hereafter:-
"On analysis of SOF it is observed that despite remarks
to the contrary by either the Master of the vessel or
Supplier's Agents, the remarks of MMTC have prevailed
and despatch earned. Even where specific
remarks/reasons have been given in SOFs by the Master
or Supplier, similar to the remarks in the SOF for MV
Dubai Guardian, the remarks of the receiver MMTC
have prevailed.
The stand which the Respondent took prior to the dispute
having arisen was the correct view on the analysis of the
SOF and on that basis the accounts with the foreign
suppliers were settled. It was rightly admitted that
despatch has been earned by the Claimant on 28 vessels
with one vessel on CQD basis and two on demurrage.
After having correctly come to a rightful conclusion, the
Respondent was not at all justified in taking a different
stand on the basis of the remarks of higher authorities,
particularly when the Respondent withheld the vital and
relevant information as regards the account position with
the foreign supplier."
(emphasis is mine)
30.12 Thus, while the submission on behalf of the petitioner that the
Arbitral Tribunal had taken the information contained in the Minutes
of Meeting dated 22.11.2006 and 23.11.2006 with respect to 27
vessels is correct, the other submission that it had erroneously not
taken into account the information contained in the very same minutes
vis-à-vis the four vessels including the subject vessels, in my view, is
misconceived. The reason is apparent from the discussion of the
Arbitral Tribunal extracted hereinabove. It is the petitioner's officer
who had carried out the analysis of the SOFs in the first instance.
Therefore, in order to justify the turn around it was incumbent upon
the petitioner to place on record the relevant information. The failure
on the part of the petitioner to produce relevant information left the
Arbitral Tribunal with no choice but to analyize the material which
was placed before it and reach a conclusion based on its appreciation
of evidence.
30.13 I find nothing erroneous in view or the methodology adopted by
the Arbitral Tribunal. The Arbitral Tribunal, in my view, was right in
drawing an adverse inference against the petitioner, in view of the fact
that it withheld vital information.
30.14 In my view, the initial onus lay on the petitioner to demonstrate
that a settlement had been arrived at with the foreign supplier in terms
of the Minutes of Meeting dated 22.11.2006 and 23.11.2006. Since, it
failed to do so, it necessarily had to be held and which is what the
Arbitral Tribunal held, that qua the subject vessels the respondent had
earned despatch.
30.15 I must indicate that during the course of arguments it was
sought to be suggested that something was amiss as Mr. P.K. Chaki,
who had dispatched the communication 28.11.2006 had retired on
30.11.2006. This may have been coincidental and therefore, such
suggestion would have to be rejected as it unnecessarily has the
portents of besmirching an Officer's reputation without tangible
evidence. Peculiarly, no such averment has been made in the petition
filed under Section 34 of the 1996 Act.
31. While I am on claim No.2, I must deal with other objections
raised with regard to the amount awarded under this claim. The first
objection taken is that the amount ought not to have been awarded in
USD. The second objection raised is that the interest awarded qua this
claim should have commenced from 02.07.2012, when the second
SOC was lodged, in which, for the first time, a claim under this head
was made in the USD. The third objection taken is that the interest
should have been given on the basis of libor and not at the rate of 12%
per annum.
32. Insofar as the first objection is concerned, in my view, a perusal
of the material placed before the Arbitral Tribunal including the
Minutes of Meeting dated 22.11.2006 and 23.11.2006 would show
that despatch and demurrage were calculated in USD. The fact that the
respondent in the first SOC had quantified the amount in INR would
not, to my mind, prevent the respondent from claiming the amount in
USD. Furthermore, a perusal of Clauses 2.6.1 and 2.12.1, referred to
on behalf of the petitioner in support of this objection, would show
that these clauses relate to the service charges payable by the
petitioner and the bank guarantee to be given by the respondent. These
clauses, as rightly argued on behalf of the respondent, have nothing to
do with the calculation of despatch and demurrage. It is also important
to point out that in the SOD, the petitioner did not raise this objection
before the Arbitral Tribunal. The objection that claim No. 2 has been
quantified in USD has been raised for the first time in the Section 34
petition. To my mind, as indicated above, this objection has no merit
and is, accordingly, rejected.
33. Insofar as the payment of interest from 09.09.2010 is
concerned, according to me, it is in consonance with what is stated
above, which is that the Arbitral Tribunal was well within its power to
grant interest from 09.09.2010, when the first SOC was lodged as
surely cause of action had arisen on that date if not prior point of time.
A perusal of Section 31(7)(a) would show that unless there is a
contract to the contrary, the Arbitral Tribunal is empowered to grant
pre-award interest, albeit, at a reasonable rate. Undoubtedly, the
period spanning between 09.09.2010 and 02.07.2012, when the second
SOC was lodged, would fall within the period prescribed under
Section 31(7)(a). Therefore, this objection being without merit, in my
view, cannot be sustained.
33.1 As regards the objection taken that the Arbitral Tribunal should
have granted interest on the basis of libor and not at the rate of 12%,
one can only say, this objection, if at all, had to be raised before the
Arbitral Tribunal. What is even more surprising is that the petitioner
has not taken this objection even in the grounds mentioned in the
instant petitioner i.e., the Section 34 petition. Therefore, this objection,
which is advanced across the bar, cannot be entertained by the Court
while exercise powers under Section 34 of the 1996 Act.
33.2 While on the issue at hand, I may also advert to one other aspect
(which was, once again, put forth across the bar by Mr. Sanat Kumar)
as to the applicable exchange rate. In my view, this is an aspect which
the Executing Court will examine, if it reaches that stage having
regard to the applicable law on the issue. As correctly contended by
Mr. Virmani, the judgment debtor, if it happens to be the petitioner,
could offer to pay the amount in Indian rupees and the conversion rate,
which would apply would be the rate which is prevalent on the date of
the decree.
Claim No.3
34. This is a claim where the Arbitral Tribunal has directed the
petitioner to refund to the respondent the bank charges incurred for
extension of bank guarantee to the tune of Rs.17,46,576.27-. The
objection on behalf of the petitioner is that no material was put on
record before the Arbitral Tribunal, which would have established that
the respondent had, in fact, defrayed amounts to the extent awarded
under claim No.3.
35. A perusal of Clause 2.12 would show that the respondent was
required to furnish security-cum-performance bank guarantee in the
sum of Rs.2.5 crores during the contract period. The record also
shows that the contract was performed between the period spanning
from May-June, 2005 till January, 2006. The record further indicates
that the respondent did extend the subject bank guarantee eleven (11)
times (see: Ex.CW-2/R-1 to Ex. CW-2/R-12). The first extension took
place on 23.01.2007 while the last extension was obtained on
24.02.2009. A perusal of the second SOC would show that an
assertion to the same effect has been made by the respondent in
paragraph 12 of the second SOC. The respondent's witness, Mr. P.K.
Banerjee (CW-1), in paragraph 10 of his affidavit of evidence had
made a similar assertion. The petitioner in paragraphs 10 & 12 of its
SOD, apart from making a bald assertion that the quantum of the bank
charges claimed by the respondent are disputed, took the plea that
since it had furnished a counter bank guarantee to NTPC, the said
bank guarantee would not be released till its counter bank guarantee is
released. In other words, according to the petitioner, extension of the
subject bank guarantee was necessitated on this score. Furthermore, a
perusal of the cross-examination of the respondent's witness Mr. P.K.
Banerjee (CW-1) on the issue of extension of subject bank guarantee
would reveal that no question was put to him with regard to quantum
of bank charges. The same is evident upon a perusal of the following
extracts from the testimony:
"...I am aware of the fact that the respondent had given
bank guarantees to NTPC. It is correct that NTPC was
not releasing the bank guarantees initially but later on,
NTPC has not only released bank guarantee but settled
all dues of the MMTC. I cannot say when NTPC released
the bank guarantee and settled the dues of the
respondent. However, I can state that in one of the
letters dated 4th March 2010, the Respondent admitted
that all claims including the return of bank guarantee
were settled with NTPC....."
35.1. The Arbitral Tribunal in respect of claim No. 3 has made the
following observations:
"...The bank guarantee was furnished in accordance
with the terms of the contract as provided in clause 2.12.
The amount of the bank guarantee had to be released by
the Respondent on conclusion of the contract by the
Claimant. It is not disputed that the contract stood
concluded. The amount ought to have been paid by 2nd
June, 2009 but on the Respondent's direction the bank
guarantee had to be kept renewed by the Claimant from
time to time, which it was not required to do. This
resulted in the claimant incurring bank charges which
otherwise were not payable. The Claimant is held
entitled· to recover this amount of the Bank charges..."
35.2 Given the fact that the respondent had made the necessary
pleadings and followed it up with oral evidence with regard to the
quantum which was not questioned in the cross-examination, the
Arbitral Tribunal's conclusion in that behalf cannot be faulted with.
The submission to the contrary, advanced on behalf of the petitioner
is, consequently, rejected.
Claim No.4
36. This claim relates to grant of pendente lite and future interest by
the Arbitral Tribunal. As noted at the beginning of my narration, the
Arbitral Tribunal has granted interest at the rate of 12% per annum in
respect of amounts awarded under claims No. 1 to 3. The period for
which pendente lite interest has been awarded spans from 09.09.2010
till the date of the Award (i.e. 07.01.2017) at the rate of 12% per
annum. As regards future interest, once again, the rate awarded is 12%
per annum on the sum directed to be paid including the component of
interest, albiet, from the date of Award till the date of payment. In this
behalf, the Arbitral Tribunal has relied upon the judgment of the
Supreme Court in Hyder Consulting U.K. Limited Vs. Governor of
State of Orissa, (2015) 2 SCC 189.
36.1 I find no error either, firstly, with regard to the period for which
interest has been granted as the first SOC was lodged, albeit, with the
ICA on 09.09.2010. As indicated above, the Arbitral Tribunal has the
necessary powers vested in it to award pre-award interest under
Section 31(7) (a) of the 1996 Act at a reasonable rate unless there is a
contract to the contrary.
36.2 I have not been shown any provision obtaining in the June,
2005 Agreement which would prohibit the grant of interest or specify
a rate of interest other than the rate at which the Arbitral Tribunal has
awarded. As to whether 12% per annum is reasonable rate of interest,
in my view, would draw the Court in a Section 34 petition into an area
where discretion vests with the Arbitral Tribunal. The Arbitral
Tribunal comprises persons who have had vast experience in the field
of adjudication being former Judges. The rate of interest awarded is in
no way usurious and, therefore, cannot be interfered with, except
where a litigant is able to show that the rate of interest awarded was
way beyond the rates which were generally granted by Courts during
the period in issue. Nothing of this kind has been shown by the
learned counsel for the petitioner.
36.3 Insofar as future interest is concerned, the same rationale would
apply. Though, Section 31(7)(b) read with the Explanation says that
unless the Award otherwise directs the sum directed to be paid by the
Arbitral Tribunal shall carry interest at the rate of 2% higher than the
current rate of interest prevalent on the date of the Award, nothing was
placed before the Arbitral Tribunal or before me to demonstrate that
the interest awarded was beyond the rate prescribed under the said
provision. As a matter of fact, no argument qua the rate of interest
being unreasonable was raised before the Arbitral Tribunal. The
respondent, in fact, had claimed in the second SOC both pendente lite
and future interest at the rate of 24% per annum.
36.4 Given these circumstance, in my view, no fault can be found
with the future interest awarded by the Arbitral Tribunal.
36.5 Notably, no objection vis-à-vis the rate of interest was taken by
the petitioner in the SOD.
37. Insofar as the last aspect is concerned, which is award of Costs
by the Arbitral Tribunal, the objection taken by the petitioner is that
the Arbitral Tribunal without quantifying the costs, in paragraph 8 of
the impugned Award simply concludes that the respondent is entitled
to full costs of the arbitral proceedings.
37.1 It was argued on behalf of the petitioner that in the first SOC,
the respondent had quantified the litigation expenses as Rs.2 lacs and
that in the second SOC they were enhanced to Rs.25 lacs.
Furthermore, it was pointed out that, though, the Arbitral Tribunal on
18.05.2016 (when it had reserved the matter for rendering the Award)
directed the parties to file bill of costs, the respondent had not
complied with this direction.
37.2 In sum, the argument advanced on behalf of the petitioner was
that the Arbitral Tribunal could not have ruled that full costs should be
awarded to the respondent. On behalf of the petitioner, it was further
pointed out that after the Award was reserved, the respondent, via the
legal notice dated 15.02.2017, had demanded from the petitioner costs
in the sum of Rs.1,10,89,479/-.
37.3 On the other hand, on behalf of the respondent, it was
contended that the aspect of costs could be examined at the time of
execution of the Award. The argument was that this aspect cannot
form the subject matter of a Section 34 petition. Without prejudice to
this contention, it was submitted that the Executing Court could award
the full costs amounting to Rs.25 lacs as claimed in the second SOC
by the respondent if the claim via legal notice dated 15.02.2017 was
thought to be excessive.
37.4 In my view, on this score, the respondent's submission is flawed
and cannot be accepted. The Arbitral Tribunal under Section 31(8)
read with Section 31A was required to quantify the costs. It is
precisely, for this purpose that the Arbitral Tribunal on 18.05.2016
had directed the parties to submit their bill of costs. The respondent,
for some reason, chose not to submit its bill of costs. Therefore, the
Arbitral Tribunal, to my mind, had no material, whatsoever, based on
which it could have directed payment of full cost to the respondent.
Ordinarily, I would have remitted the matter to the Arbitral Tribunal
under Section 34(3) of the 1996 Act for dealing with this aspect of the
matter, however, given the fact that the respondent chose not to file
the bill of costs, despite opportunity having been granted in that
behalf, I am not, at this stage, inclined to remit the matter to the
Arbitral Tribunal on this score. Therefore, qua this aspect, the petition
is allowed. The Arbitral Tribunal's direction that full costs should be
paid to the respondent is set aside.
38. Before I conclude, I must indicate that the judgment cited by the
learned counsel for the petitioner in the matter of Oil & Natural Gas
Corporation Ltd. Vs. Saw Pipes Ltd., Associate Builders V. Delhi
Development Authority, Rajasthan State Industrial Development Vs.
Diamond & Gem Corporation Limited & Anr and K.P. Poulose Vs.
State of Kerala & Another, enunciate principles of law with which
one cannot but agree. However, in view of the facts and circumstances
obtaining in this case, I can only say that the Arbitral Tribunal has
awarded claims in favour of the respondent bearing in mind the terms
of the contract which defines, like in every other case, the periphery of
its jurisdiction within which it is bound to operate contrary to what has
been stated by the learned counsel for the petitioner. For the reasons
given above, I am of the view that the Arbitral Tribunal has not
ignored any material document or even taken into account irrelevant
matured
38.1 Insofar as the judgment in the case of Sanjeev Kumar Jain Vs.
Raghubir Saran Charitable Trust & Anr is concerned, I have already
taken into account the principles set forth therein.
38.2 Insofar as the petitioner's own case is concerned, that is, the
judgment of the Division Bench of this Court in MMTC Vs. Al Bamar
Company Ltd., on the issue of grant of interest of the basis of libor I
can only say that in the instant case, the objection has been raised on
behalf of the petitioner across the bar. The petition under Section 34 of
the 1996 Act raises no such ground. The petitioner has not impugned
the grant of interest vis-à-vis claim No.2 on the ground that it ought to
have been awarded on the basis of libor and not at the rate of 12% per
annum, as is awarded by the Arbitral Tribunal. Therefore, the said
judgment in the facts of the instant case will not apply.
39. Section 34 petition is sustained only with respect to the
objection vis-à-vis the grant of costs to the respondent. As regards all
other aspects, the impugned award is upheld. The petition is disposed
of in the aforesaid terms. There shall, however, be no order as to costs.
RAJIV SHAKDHER, J
OCTOBER 31, 2018
pmc/a
